The planned initial public offering of General Motors Co is likely to leave the U.S. government with a minority stake while also raising new funds for the automaker, people briefed on the still-developing plans said.
The U.S. Treasury, which owns 60.8 percent of GM stock as a result of its $50 billion bailout last year, aims to sell about 20 percent of its holdings as part of the stock sale, two sources with knowledge of the preparations said.
That would leave the U.S. government with a 49 percent stake before accounting for the further dilution from new GM share issuance.
GM is considering issuing new capital in the IPO, chipping away at the one liability on its balance sheet that the government-funded restructuring failed to address: a $27 billion shortfall in its pension funding, the sources said.
The retiree healthcare trust, affiliated with the United Auto Workers union but administered independently, also plans to sell part of its 17.5 percent stake in GM to raise cash and diversify its portfolio, the sources said. The healthcare trust is the No. 2 GM shareholder after the U.S. Treasury.
The sources asked not to be named because they were not authorized to discuss the confidential negotiations and no final decisions have been made.
The sources could not detail plans for the two smaller GM shareholders. The governments of Canada and Ontario own 11.7 percent of GM, while bondholders in the Old GM, now known as Motors Liquidation Company, have 10 percent.
The emerging terms of GM's planned IPO are expected to dominate interest among potential investors and analysts who will gather in Detroit on Tuesday to hear the first financial presentation by the automaker's new executive team headed by Chief Executive Ed Whitacre.
BEYOND THE BALANCE SHEET
GM is expected to talk about how a stronger balance sheet emerging from bankruptcy has made it possible to break even despite sharply lower U.S. sales, how it plans to expand further in fast-growing markets in China and how it plans to address remaining issues, like funding the restructuring of its money-losing European unit Opel.
Mirko Mikelic, a fixed income portfolio manager at Fifth Third Bank in Grand Rapids, Michigan, said he expected GM to face grilling about the risks of a return to recession in the United States.
There's concern about a double dip out there. That's probably the biggest thing that's weighing over GM coming to the market because that's going to keep (auto sales) down for another year or two, he said.
Industry-wide U.S. sales have stabilized in the first half of the year above 11 million units on an annualized basis but have failed to show signs of the recovery that automakers, including GM, had expected to see.
GM is preparing for a stock listing as early as this year, just over a year after emerging from a government-sponsored bankruptcy that wiped out equity investors. Sources have said GM could raise up to $20 billion in what would be one of the largest U.S. IPOs ever.
Whitacre, a former AT&T executive, has been focused on changing the way GM executives operate, people inside the company have said.
Reforming GM's bureaucratic decision-making and shaking up its product development were top priorities for GM even under former Chief Executive Fritz Henderson, who steered the automaker through bankruptcy before being ousted in December.
GM executives say that process has accelerated under Whitacre, who is expected to face questions on the topic on Tuesday when he meets analysts and potential investors at GM's development and engineering center in Warren, Michigan.
GM wants to prepare everybody for the IPO, talking about all the good things the company's doing, one person involved in the preparation said. It's time to start talking to the market about what GM is today.
Among the changes Whitacre has driven to simplify and flatten decision-making was putting Mark Reuss, president of North American operations, in charge of turning around U.S. operations.
Whitacre, who still commutes back to his home in Texas on weekends, was initially frustrated by the way GM's reporting lines and responsibilities were tangled, particularly in vehicle development and marketing.
He wants to be able to say, who's in charge of this, and to point to that person, one aide said.
Other GM executives, including Vice Chairman Tom Stephens, say the radically simpler mission statement credited to Whitacre -- Design, build and sell the world's best vehicles -- has the automaker's engineers motivated to do better with launches still in the pipeline.
Karl Stracke, vice president of global vehicle engineering, said: The real change came along when Ed Whitacre said, 'Guys, what is important in this company?' And he said the product is the most important. So, now, there are no financial people in the middle of everything anymore.
U.S. sales for the first five months of 2010 showed a 15 percent gain for GM, a better percentage of growth than the top two Japanese rivals, recall-restrained Toyota Motor Corp at 10.5 percent and Honda Motor Co at 13 percent.
A stock listing could allow GM to start to rebuild consumer confidence in brands tarnished by years of quality missteps and criticism that it became Government Motors, analysts said.
A successful GM IPO would also represent an important political win for the Obama administration, which engineered bailouts for both GM and its smaller rival Chrysler in 2009 in the face of Republican criticism and public opposition.
(Additional reporting by Philipp Halstrick in Frankfurt and Kevin Krolicki in Detroit; Editing by Gary Hill)